NHS chiefs and health unions in England are understood to be close to agreeing a three-year pay deal.

Talks on an award for all health staff - except for doctors and dentists - are said to be constructive and going well.

The government has already said it would scrap the 1% cap on public sector pay, with the chancellor indicating more funding for higher wages.

Health unions are keen to negotiate a pay deal well above the cap imposed by ministers in recent years.

But BBC health editor Hugh Pym says he understands that the Department of Health and Social Care, and NHS Employers - the group representing healthcare bosses - are concerned about recruitment problems and ready to agree an award that makes up some of the lost ground.

It is believed that there have been positive talks between the two sides and a deal is not far off.

But reports of a 6.5% pay award over three years in return for NHS staff losing a day's holiday have been described as premature.

Any outline agreement between the two sides will need final approval from ministers.

The Treasury has indicated that in return for extra money to fund the pay deal some updating of working practices may be required.

In September, unions representing nurses and other NHS staff wrote to the chancellor to demand a 3.9% pay rise and an extra £800 to make up for the "cut" they had seen in recent years.

They said pay has fallen by 15% since 2010 once inflation is taken into account.

It came after ministers agreed to give police officers a 1% rise plus a 1% bonus, with prison officers getting a 1.7% rise - both funded from existing budgets.